HELOC recommendations and advice

[Julia Newman]

I am renovating an inherited home and want to take a HELOC to help with costs. I have a few questions.

Would anyone walk me through the basic process and let me know what to expect/ look out for? 

Is this a good time or is there a reason to wait, i.e. interest rates falling?

Any referrals to a bank or loan officer in Central/ East Dallas?

Many thanks!

[Seth McGathey]

Seems like a good plan too me, especially if you intend to do the repairs and then take out a standard mortgage to pay down the HELOC. (Or spend a very small amount of money that you can easily pay down). HELOCs are pretty simple. The lender you work with will walk you through the whole process. Mainly just a bunch of documents you need to provide so they know you can pay and stuff, just like a normal mortgage. And after that, you will essentially have a bank account that instead of you earning interest for the money being there, the lender earns interest when the money isn’t there. But transactions and stuff work just like any other checking account. As far as interest rates go, as long as you can afford to pay it down regularly, I wouldn’t worry as much about that. HELOCs usually have their interest rates change based on the current rate. They should tell you how often they are allowed to change it. Usually it is something like .5% per year. And some places will allow you to pay a small fee to keep it from changing. Something like a few hundred dollars each time it is allowed to change. Beyond that, I found a crazy hack with mine. My bank allows you to make HELOC payments with your credit card, just like paying any normal bill, with no fees. This means, I was able to open some new credit cards and now every month I pay off my HELOC with my credit cards, then just as my cards are about to close for the month, I pay them off with my HELOC funds. Once the cards close for the month, I pay off my HELOC again with the cards. This is actually amazing because credit cards only charge you interest for what you didn’t pay off in the pay period. And HELOCs charge you interest based on what is missing and it calculated daily. So by doing this, I am paying 2-3 days of interest for the money I took out of my HELOC instead of paying it for the full month. Additionally, I am putting $50,000-$80,000 worth of points on my cards every month. So I am actually making money off using my HELOC instead of paying money. Caveats in this. -Keep in mind I don’t think most banks allow you to pay HELOCs off with your credit cards. -If I accidentally missed the date on my credit card payments, I would pay huge interest on the money, negating the benefits. (I have lots of alarms to remind me). -Once the HELOC draw period is over (I have 4 more years) this game is over and I can’t pull the money out of my HELOC anymore. So ideally it is all paid down by then so that I never really pay much interest on it. -Finally, my credit card company doesn’t seem to like it but hasn’t done anything about it. They did call to question my monthly charges of tens of thousands of dollars, and seemed very dubious of my explanation. But to my knowledge there is nothing they can do about it since I am not breaking any laws or rules. And it has been months since they called, so I think I am in the clear even if they are unhappy.